Texas And The New NCCI Experience Mod Formula

Based on a little research that I've been doing, it looks like a lot of Texas employers are going to be getting some really unpleasant surprises in their experience modification factor calculations, starting July 1, 2015.

Regular readers know I've been writing a fair bit about the changes NCCI has made in their experience rating formula. Basically, NCCI has been implementing increases in how much of each individual claim gets fully counted in calculating experience modifiers. Until recently, only the first $5,000 of each claim counted fully--everything over this was discounted. But that changed in 2013, and the "split point" has been significantly increased in steps. At the moment, the first $13,500 of each claim gets fully counted. Next year, it goes up to the first $15,500 of each claim.

Now, Texas, until recently, wasn't really an NCCI state. Texas outsourced and licensed manuals from NCCI but kept the $5,000 set point. That's going to change, starting July 1, 2015, when Texas officially starts using the NCCI experience rating plan manual rules.

And rather than implement the higher set point in increments, according to the Texas Register (official publication of the Texas Secretary of State) "NCCI and staff recommend
implementing the proposed changes in their entirety, as opposed to transitioning the implementation over time."

So for Texas employers, the set point will just jump from $5,000 to $15,500. That means, for Texas employers that have any claims in the past three years that were greater than $5,000, their experience mods are going to jump.

We've already written about how we've seen a considerable increase in the number of employers contacting us who are desperate to reduce their experience mod because it's shot up over that magic 1.00 threshold. Texas employers are about to learn the hard way about the effect of this change, and they won't even get the changes implemented in increments--they get the full shot all at once.

Get ready to hear some screams from Texas employers sometime around the middle of next year, as these new experience mods start being promulgated.